Saudi Arabia is about to deposit $250 million with Jordan’s Central Bank as part of an $800 million planned contribution to help the country's ailing economy, Jordan’s prime minister said on Wednesday.
Abdullah Ensour said the money is part of a bigger five-year, $2.5 billion fund that the Gulf Arab countries decided to set up last December at a summit in Riyadh to help finance development projects in the kingdom. Morocco received a similar commitment.
Economic instability in Jordan, a U.S. ally with the longest border with Israel, comes at a volatile time for a region in turmoil from Syria to Gaza.
Gulf donors such as Saudi Arabia, which rescued Jordan with a cash injection of $1.4 billion a year ago, have held off from giving direct budget support so far this year, with speculation about the reasons ranging from heavy spending by Gulf nations to stave off disaffection at home, concern about corruption in Jordan, and more pressing regional priorities, according to senior diplomats and economists.
But Ensour said a Saudi delegation which held talks in Amman on Wednesday has now agreed to finance $487 million worth of projects in the energy and water sectors and another $300 million worth of infrastructure projects would be approved by year-end.
UAE foreign minister Sheikh Abdullah bin Zayed al-Nahayan said last week the Gulf Arab states were looking at more ways to help Jordan’s ailing economy after a government decision earlier this month to cut fuel subsidies sent energy prices soaring and led to street protests, some of which turned violent.
Jordan will also soon be getting another $125 million from Kuwait to finance projects slated for this year, Ensour said, adding that the Gulf oil producer had already deposited $250 million with the country’s monetary authorities in development aid.
Ensour said the kingdom had also reached a memorandum of understanding with Qatar to commit itself to extend up to $1.25 billion in project finance.
The country has so far largely avoided the kind of civil unrest that has toppled four Arab heads of state in the last two years, but rising energy bills after disruption to cheap gas supplies from Egypt and a steep drop in foreign grants have pushed the aid-dependent kingdom to the brink of economic crisis.
Jordan hopes the fuel subsidy cuts will help show its commitment to fiscal consolidation and win support from the International Monetary Fund, Western and Arab aid, and help it to tap capital markets in a Eurobond issue.
Economists have said Jordan’s ability to maintain a costly subsidy system and a bloated state bureaucracy, whose salaries consume the bulk of state expenditure, is increasingly untenable in the absence of large foreign capital inflows or infusions of foreign aid.
It’s annual budget deficit now stands at over $3 billion or some 11 percent of GDP, and the government has been forced to rely heavily on borrowing from domestic banks, having struggled to reduce its budget deficit in order to secure a $2 billion loan from the IMF.
Total public debt has increased 19 percent since last year to $22 billion and is now 72 percent of GDP, while foreign reserves have fallen by 34 percent to $6.85 billion since the end of last year.